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<b><I>Spectrum Athletic Clubs, Los Angeles, uses a rewards program to reach people inside and outside its clubs&#8217; four walls, a move that has helped increase revenue by $40 million in three years. </b></i>

Q: Tell me about the Health Miles program that your company offers to corporations for their employees and, more recently, began offering to your club members.

A: We've been one of the lead companies working on Health Miles, a software product with [a rewards company]. Health Miles is a Web-based product that allows a member or employee to track all their [health and exercise] data associated with measurements and activities. It creates “miles” that are converted to a rewards program. (Editor's note: This program is similar to the rewards programs that airlines have in place.)

Today, our members can upgrade and add miles to their memberships. They can earn more than $1,000 in prizes over the year. It means taking their blood pressure once a month, doing a fitness assessment twice a year, tracking activity onto the Web site using a Go Zone — a computerized pedometer that's downloaded at a kiosk at our clubs. You earn miles, and you hit levels and earn money. You can put these miles back into things at the club or [use them at] one of 40 major participating retailers.

We've been working with [the rewards company] for three years. We rolled it out in 2006 in San Antonio. We landed a school district with 10,000 employees in San Antonio as our first big client. Health Miles was included in their health care services. So if you signed up for health care with the school district, you signed up for a membership in Health Miles.

We allowed our employees to do Health Miles, and we paid for it for them and their families. We sat down with the five major insurers. We have 500 employees, which was $1.5 million per year for health care. We asked for pricing from all five insurers. All came in at a 17 percent increase year over year. Then, I held a meeting with each one of them. I walked them through Health Miles and our claims history. Then, they resubmitted their plans. All came through with a lower price.

Instead of taking our savings to the bottom line, I upgraded all the services that we provide to our employees on the medical side. So we went up 6 percent in costs, but their co-pay costs went down and we got them a 100 percent co-insure match on a PPO. We did this because if we can show the world that the preventive side is the way to go, then our employees have themselves a career path that will rank up there with the computer industry.

Q: How much participation in the rewards program are you getting from your club members?

A: The beauty of Health Miles is that you are engaged in our product throughout your entire day. If you wear the Go Zone, which is where you earn most of your points, then you are using Spectrum all day. You are getting rewarded by us for your activities. So it's no longer dependent on you to walk through our doors to have an interaction with our company.

So if someone comes two to three times a month through our doors, but they use our Go Zone, then they are using us every day. They are thinking, my typical day is only 3,500 steps, but I need 7,000 steps a day. So should I walk someplace for lunch, or do I go by the club to get a workout? If I can get into their psyche to change that behavior so they are getting exercise a little bit more all day, then we've had an impact on their world. And they are getting rewarded for this.

It's tearing down the walls. You don't value our product by simply walking through our doors. You value it by a dynamic environment.

We are finding that members are buying Health Miles for their parents who are not even in the cities that we operate in. Maybe their parents are in Waco, TX, and they have a discussion about how many steps they took, and they do it in a fun, competitive way. That creates a whole new line for us as far as where we can go with the business.

Q: How much profit are you making with this rewards program?

A: This year, we will creep over the $100 million mark. We grew from $60 million in the last three-and-a-half years. We still have 22 clubs, but we grew $40 million in revenue. The potential is astronomical. If we can prove out this process, the revenue growth for us and for the industry is fantastic.